Be Prudent About Payback - For Investors and Yourself

“Never take money from anyone whose life could
change if they didn’t get it back, and be prepared to take nothing for yourself
for a while,” advises restaurant consultant Clark Wolf. Of course, this isn’t
to say restaurants can’t provide a good return but expect to wait a while
before you and your investors reap the rewards of your hard work. “Restaurants
are for long term, slow money back investors – investors that more Warren
Buffet-y,” says Wolf. Your first priority is to establish the restaurant and
plug any profits back into. Restaurateurs eager to prove their projects are a
success are often overly ambitious and start compensating their investors
prematurely. “Structure payback in a way that best protects the business,” says
Wolf. Typically the payback period for a restaurant investment is three to five
years. And don’t use assume that a firm handshake between friends is good
enough when establishing terms of an investment. “Engage lawyers and
accountants at the outset. Take as much time as you may spend thinking about
your concept and your design to establish how you’re going to compensate your
yourself, and what happens after you’ve paid back your investors,” advises
restaurant consultant Gary Levy. “If you hit the gland slam and your restaurant
is fabulous make sure you have the freedom to go off on your own, or to invite
your initial investors to go with you. I can’t tell how many times people open
restaurant on handshakes without the right legal documents, and it becomes very
problematic and distracting down the road.